Analysis: INTC MSFT LOGI AMD NVDA QCOM TSM AMAT

What a disaster.

We're talking about Intel (INTC) June-quarter results. The company not only delivered a disappointing quarter but reset its 2022 guidance meaningfully lower, putting its shares under pressure Friday.

For the current quarter, the chip company now sees earnings of $0.35 per share vs. the $0.84 consensus. It is now guiding for third-quarter revenue of $15 billion-$16 billion vs. the $18.67 billion consensus. As for full-year 2022, its EPS expectation is now $2.30, down from its prior forecast of $3.60 and the $3.39 consensus. In terms of revenue for the year, Intel now expects $65 billion-$68 billion, down from $76 billion and well below the $74.4 billion consensus.

What do we make of this?

Some of it can be accounted for by the weakening PC market, which Intel said it is seeing for the consumer market even though the enterprise and high-end PC market remains strong. That matches comments we've collected from Microsoft (MSFT) , Logitech (LOGI) , and Samsung in recent days. Indeed, during the June quarter, there were enough data points on the PC market that a good deal of that news was already priced into chip companies, including our own Advanced Micro Devices (AMD)  .

In terms of Intel's data center business, the company now expects to grow slower than the overall data center market, which in plainer English means it will continue to experience market-share loss as AMD and Nvidia (NVDA) continue to eat its lunch. Comments on cloud and data center spending continue to be vibrant, and that suggests both AMD and Nvidia will deliver June quarters that were better than feared. AMD will report its quarterly results this coming Monday (August 1) after the market close.

Turning to Intel's capital spending, the company is cutting its 2022 forecast to $23 billion from its $27 billion target earlier this year. Despite the reduction, Intel is still spending roughly $5 billion more than it did last year. At the same time, the CHIPS bill has passed, which should result in Intel's capital spending remaining at elevated levels in 2023 as it adds additional foundry capacity.

During the earnings call, Intel discussed its recent win with MediaTek and commented it is talking with several other fabless chip companies. We are not surprised by this considering the supply-chain issues during the pandemic and those with China during the June quarter. How quickly companies like Qualcomm (QCOM) , Nvidia, AMD, and others will be willing to use Intel's foundry services remains to be seen, however. We suspect they will be more inclined to use newfound domestic capacity from Taiwan Semiconductor (TSM) . That said, all this forthcoming domestic capacity is a positive for semi-cap equipment companies, including our own Applied Materials (AMAT) .